Alchemy-powered ICO: ‘Blockchain is good for money, but useless as technology’

In times when initial coin offerings (ICO) are raking in billions of dollars and raising the value of your company could be as simple as adding the word “blockchain” to its name, it has become crucial to question why businesses need their own distributed ledger – and their own cryptocurrency.

This is precisely the question I found asking myself when I stumbled upon Synthestech: a cold fusion research firm purportedly developing cutting-edge technology for “transmutation of cheap elements into valuable elements and isotopes,” which has raised almost $600,000 in its own ICO.

What makes this case particularly interesting is that – similarly to blockchain – nobody has managed to use cold fusion tech productively on a commercial scale. Synthestech is gearing up to do both – at the same time.

The company is seeking to raise $1 million and accepts payments in Ethereum and Bitcoin, but also in US dollars and Euro. In return, Synthestech says it will distribute its STT (ERC20) tokens via the Ethereum network, giving investors one token for each dollar they’ve shelled out.

Synthestech has detailed its crypto-plans in its white paper , but the most striking part about the document is the absence of information on its use cases for blockchain and cryptocurrency.  Indeed, the word ‘blockchain’ appears only once in the entire document and the word cryptocurrency – twice (one time referring to one a Synthestech advisor serving as a “cryptocurrency consultant”).

“[STT tokens] are dividend tokens, which give the right to receive 36 [percent] of the profit of ST Global inc. company incorporated in Belize.,” the document reads. It then moves on to clarify that the tokens “do not grant shareholder rights.”

Blockchain enthusiasts have often mentioned the technology could one day be ideal for handling large volumes of microtransactions, but it seems Synthestech has no intention of doing that. “The use of Blockchain [sic] technology will allow to provide regular payments to [STT] token holders in any convenient form,” the white paper clarifies. “If possible – on a quarterly basis.”

Another popular feature of blockchain-based technologies is that all information stored is immutable, making it impossible to tamper with records. But here is the kicker: Synthestech seemingly has no interest in this functionality either.

So why is a cold fusion research startup turning to blockchain tech? According to Synthestech head of laboratory Roman Karabanov the answer is pretty simple.

“Block chain [sic] is good for money, but I don’t see how to use it for technology,” Karabanov told TNW.

“ Funding for research is uncommon for traditional venture capital,” he continued. “Block chain [sic] is the fastest way to get funded and this makes it possible to reach implementation stage much sooner.”

Synthestech readily admits that most of the funds raised in its ICO will go towards building a state of the art laboratory where the company can continue its cold fusion research. “ The development rights will belong to the Synthestech laboratory,” the company says on its website.

To increase the value of its tokens, the cold fusion startup promises it will use 36 percent of profits to buy back its own tokens. This approach, Synthestech insists, will eventually pump the price of the STT tokens to “no less than $450.” For context, this amount equals to a more than 450-fold return on investment.

One detail to stress is that there is no guarantee Synthestech’s research can deliver on its promises. When asked about the functionality of their technology, Karabanov told TNW its team has “observed the [cold fusion] phenomenon” but has yet to develop a functioning prototype.

According to a roadmap posted by the Synthestech team, the technology won’t be commercially ready before late 2019 – and the first dividends from investments are expected to come before that. It is worth noting that missed deadlines are nothing uncommon in the blockchain industry, so it remains to be seen whether the startup can reach its goals on time.

In the meantime, Synthestech is not holding back on promoting its ICO to blockchain and cryptocurrency enthusiasts – despite the fact it hardly makes use of these technologies.

The company has secured sponsored (read paid-for) coverage in a number of popular news outlets like CCN , Bitcoinist , and CoinSpot (in Russian). It has also managed to get its press release on Business Insider’s Markets platform .

Contrary to the common misconception, blockchain is hardly a magical fix for everything. Quite the opposite, it is a highly experimental technology which is yet to prove its usefulness in practice. The same goes for cold fusion and low energy nuclear reactions , which scientists have pursued to no avail since at least the 1980s.

Earlier in January, Nobel laureate and esteemed economist Paul Krugman controversially compared Bitcoin to cold fusion as an example of two overhyped technologies that are still very early on in their infancy – and thus difficult to predict when (and whether) they will become a commercially viable solution.

Synthestech has since taken Krugman’s criticism of cryptocurrency and turned it into a marketing campaign:

But that doesn’t change the fact: Building an entire business around two unproven technologies like blockchain and cold fusion is a huge risk for investors, to say the least.

It is even riskier considering that investing in Synthestech tokens offers no guarantees you will be entitled to a certain portion of all of its profits. Instead, investors are expected to blindly trust that the company will be profitable – and that it will spend a third of its profits to buy back its tokens.

ICO monitoring service Tokendata recently released a study indicating that a staggering 46 percent of all 902 companies that ran token sales last year have already failed. This is by no means evidence that Synthestech will fail too, but it is a fairly clear sign that the chances of failure are extremely high.

So if I were you, I would seriously think twice before pledging cash to Synthestech hoping it can transmute $1 into $450: blockchain-powered alchemy sounds like a cool concept, but it is as real of an opportunity as investing in a young Andalusian shepherd’s dreams of finding treasure at the pyramids of Egypt .

Blockchain will make things even harder for blackhat hackers

Hacking can be fun. It’s also educational. And to be clear, I’m not talking about the steal-your-stuff type of hacking.

I’m referring to taking things to the extreme — finding interesting ways to solve things, discovering secret entryways, maximizing hidden features, and other cool stuff.

Hacking isn’t essentially evil by itself. Like any tool or method, it’s how you use it that matters. So it’s bad if you hack with malicious intentions, but it mostly reflects your own character rather than the act of hacking. That’s why we have so-called “whitehat” and “blackhat” hackers, and a whole granola of gradients in between.

By definition, hacking in the digital sense means unauthorized intrusion into a computer system. Its connotations also include an ad hoc fix for something that is done through an innovative and unconventional manner. Think “life hack,” for example.

It’s the malicious hacks that have more visibility, however. These can cause so much damage, so much monetary loss, and can even potentially kill .

So-called blackhat hackers, or malicious hackers, gain access to systems with the intent to steal data and identities, take over systems, and deface websites, among others. They can then sell your data to third parties, or they can hold your data hostage (they lock it up and only give you the keys when you pay up).

In the Wannacry ransomeware attack , hackers would lock and encrypt your data, and request payment in Bitcoin to unlock it.

I’ve seen it happen to many businesses. Believe me, if you don’t want to wake up in the morning to a locked computer with dangling skull icons.

And then, there’s DDoS.

DDoS is when is when a hacker establishes control on a network of “zombie computers” and IoT bots, which can be used to execute traffic-driven attacks like DDoS. The hacker controls this “botnet” (army of devices under his control) and then he can simply flood websites with overwhelming amount of data requests. This can even be done by low-skilled “script kiddies” who simply copy and paste code off the web.

Credit: Privacy Canada For all its ills, blackhat hacking is a potentially profitable enterprise. Blackhat hackers can potentially earn hundreds of thousands of dollars per year through activities like selling stolen data, extortion-type “ransomware” attacks, and threatening DDoS attacks — but being a criminal can often be a lucrative business.

What about whitehat or “ethical” hacking, then?

And, can the blockchain technology save us from the threat of blackhat hackers?

The community can contribute to cybersecurity

Turns out, you don’t need to be an expert to be part of the cybersecurity community. All you need is an internet connection with bandwidth.

Blockchain startup, Gladius.io , is empowering everyone else to fight back against black hat hackers in an innovating way.

Gladius is essentially a decentralized network for DDoS protection and content delivery.

The company seeks to disrupt the existing industry of cloud-based CDN and DDoS protection providers, which control their own infrastructure and which charge high monthly fees for protection.

With Gladius, anyone with a computer, fast broadband connection, and spare bandwidth can rent out excess bandwidth in order to contribute to global and regional pools of DDoS mitigation nodes.

During a DDoS attack, this spare bandwidth is utilized to deflect and absorb the bad traffic coming from zombie machines (the same ones that the bad hackers have taken over).

During “peacetime” or when there are no such attacks, the Gladius network acts as a global content delivery network, which speeds up access to websites, online services, and digital assets by caching content across its global network of nodes.

In other words, you can earn passive income by sharing your extra bandwidth, and thus helping so safeguard and accelerate the internet.

It’s like doing what the bad hackers are doing, but in reverse. Malicious hackers would usually use scripts and code to take over ordinary users’ computers so they can be unknowingly remote-controlled as part of a botnet. Such attacks reportedly cost businesses an average of $2.5 million per attack.

So essentially, you are making your computer a part of a network that negates or reverses the potential damage that a botnet can do — all while getting paid for it.

Whitehat hacking to the rescue

When there’s evil, there’s also good. Fortunately, some of the more skillful hackers have chosen the whitehat path.

These white hackers are  making a good living by offering security services in penetration testing and security consulting. According to the Infosec Institute , the average salary of a certified ethical hacker is $71,331 a year. In addition, so-called whitehat hackers can also earn additional income from company-sponsored bug bounties, although mostly on a freelance basis.

In most cases, each company hosts its own bug bounty program, in which whitehat hackers who report vulnerabilities get paid depending on the severity of the problem. According to Bugcrowd , businesses has so far paid out $6 million since the start of 2017, which is already a 211 percent increase from the total 2016 figure.

Bug bounties are mostly fragmented, however. This underscores the potential of an ecosystem for ethical hacking. Beyond simply establishing a marketplace, a fair, immutable, and decentralized one might hold more promise, especially in the security community.

And what better way to do this than to run the marketplace over the blockchain?

Aptly-named, Hacken.io is a startup that seeks to establish a community and marketplace for whitehat hackers. The community centers around HKN, an Ethereum-based token that serves as the cryptocurrency for white hat hacking services.

“Our goal at Hacken is to lay down the future white hat cybersecurity community framework of Eastern Europe by creating a stable means of income and financial incentives for its members,” its founders state on the Hacken whitepaper .

While the focus is on Eastern Europe, the platform can potentially support ethical hacking communities, businesses, and consultants elsewhere across the world, as is the nature of distributed technologies like blockchain.

The founders are seeking to build an ecosystem wherein each stakeholder — businesses, ethical hackers, investors, and other community members — is incentivized whenever they share or exchange value with their cybersecurity expertise. Businesses stand to gain from faster vulnerability reports and fixes. Whitehat hackers also gain from a faster mechanism of payments. The community benefits from a more secure business environment.

A blockchain for everything?

Blockchain startups have emerged to address a wide variety of technological needs, from basic to highly-technical.

With prime examples like Hacken and Gladius, we can see how the motivation behind such startups is the same: building value for the community through a faster and more open exchange of value and services.

Thus, even as blackhat hackers grow more and more skilled at perpetrating their crimes, those who are fighting back will have better support and get better value for contributing their skills, effort, and resources, through the blockchain.

Blackhat hackers, it’s time to turn white. With blockchain and innovation in tech, you have no other way but out!

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